Helena Rubinstein used guile, brilliant branding, and more than a few falsehoods to lift cosmetics from an accessory for prostitutes to a desired luxury item. Geoffrey Jones reveals her history.
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SUMMING UP: Culture change is not a cure-all for corporate management problems, but it is an important element to be considered, say James Heskett's readers. What do YOU think?
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Few scholars have studied the behavior of boards as extensively as Jay Lorsch. In this interview, Lorsch discusses current issues facing boards including executive pay, underrepresentation of women, and proposals to cleave the roles of CEO and chairman.
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The academic study of institutions provides important insights into complex problems, but is often criticized for lacking practical relevance. Institutional theorists gathered at Harvard Business School to discuss how to make their work more broadly understood and useful.
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In The Future of Boards: Meeting the Governance Challenges of the Twenty-First Century, Professor Jay Lorsch brings together experts to examine the state of boards today, what lies ahead, and what needs to change.
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Now that the worst fears about economic meltdown are receding, what should be done about lingering issues such as over-the-top executive compensation? Does government have a role? Is it time we rethink corporate governance? HBS faculty weigh in. From the HBS Alumni Bulletin. Key concepts include: With White House support, congressional leaders are intent on shifting the balance of power in the boardroom away from management. Skeptics say more than two decades of well-meaning attempts to constrain ever-soaring corporate pay and to reform governance through legislation, regulation, and shareholder pressure have, for the most part, failed or even backfired. According to Professor Brian Hall, it is not a given that executive pay practices had a role in creating the financial crisis. Director independence on boards is a mixed blessing. Independence has a downside when directors don't understand the business, says Professor Jay Lorsch. We need to rethink corporate governance structure in fundamental ways for the 21st century, according to Professor Rakesh Khurana.
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Chief executives and regulators have been blamed for the current economic crisis, but in some ways what is surprising is that boards have generally escaped notice. Clearly the experience of corporate boards in the downturn has not been explored. To understand what transpired in the boardrooms of complex companies, and to offer a prescription to improve board effectiveness, eight senior faculty members of the HBS Corporate Governance Initiative talked with 45 prominent directors about what has happened to their companies and why. These directors, who serve on the boards of financial institutions and other complex companies, were asked two broad questions: How well did their boards function before the recession? And, what do they believe should be improved as they look to the future? This white paper [PDF] first explains how the interviewees characterize the strengths of their boards, then examines in depth six areas in which they identified shortcomings or needs for improvement: 1) clarifying the board's role; 2) acquiring better information and deeper knowledge of the company; 3) maintaining a sound relationship with management; 4) providing oversight of company strategy; 5) assuring management development and succession; 6) improving risk management. Finally, the paper discusses two issues that appeared not to trouble the interviewees but that the public feels are important: executive compensation and the relationship between the board and shareholders. This paper was written by Jay Lorsch with the assistance of Joseph Bower, Clayton Rose, and Suraj Srinivasan. The interviews were conducted by Joseph Bower, Srikant Datar, Raymond Gilmartin, Stephen Kaufman, Rakesh Khurana, Jay Lorsch, and Clayton Rose. Key concepts include: Regulations and laws offer little guidance about what specifically boards should do, and, given this lack of specificity, most boards have gradually developed an implicit understanding of what their job should be. Directors expressed strong consensus that the key to improving boards' performance is not government action but action on the part of each board. To improve board effectiveness, each board should achieve clarity about its role in relation to that of management: the extent and nature of the board's involvement in strategy, management succession, risk oversight, and compliance. If, as interviewees insisted, each board's effectiveness is directly attributable to its activities, it follows that boards have a responsibility to define their own roles with clarity, and to decide how to perform those roles in light of the nature of the firm, its industry, and its particular challenges. If boards are to decide on their goals and activities, they must expect to invest extended time in hard-headed discussions of both, leading to concrete and actionable conclusions. Boards need to maintain a delicate balance in their relationship with management. They must be challenging and critical on the one hand and supportive on the other. They have to sustain an open and candid flow of communication in both directions. And they must seek sources of understanding their company beyond just management without offending management. Issues of executive compensation and the relationship between boards and shareholders cannot be ignored, if only because they affect public perceptions of business and therefore its social legitimacy. Paper Information Full Working Paper Text Working Paper Publication Date: September 2009 Faculty Unit: Organizational Behavior
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In the newly released book On Competition, Professor Michael E. Porter updates his classic articles on the competitive forces that shape strategy. We excerpt a portion on advice for new CEOs, written with HBS faculty Jay W. Lorsch and Nitin Nohria. Key concepts include: Most new chief executives are taken aback by unfamiliar new roles, time and information limitations, and altered professional relationships. The CEO must learn to manage organizational context rather than focus on daily operations. The CEO must not get totally absorbed in the role.
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Compensation committees are under pressure to keep CEO pay high, even as shareholders and the media agitate for moderation. The solution? Boards of directors need better competitive information and an ear to what shareholders are saying, says Jay Lorsch. Key concepts include: CEO compensation in the U.S. continues to soar—American CEOs make twice what their European counterparts earn. Shareholders want to moderate pay hikes for top execs, but board members often give more weight to internal organizational pressures. Boards must be more critical of consultant reports, listen to shareholders, and align CEO pay with what is earned by other top management in the company.
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Any new CEO who tries to wield power unilaterally will pay for it, according to Harvard Business School professors Michael E. Porter, Jay W. Lorsch, and Nitin Nohria. An excerpt from Harvard Business Review.
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Boards need to work smarter and with a design in mind, says professor Jay Lorsch. Lorsch discusses his new book Back to the Drawing Board, co-written with Colin B. Carter.
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In an opinion piece in the Financial Times, Harvard Business School professor Jay Lorsch argues for legislation to create an independent, self-regulatory organization to oversee accounting firms. Enron, he says, is not an isolated incident.
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Leaders of professional service firms face challenges unknown to most other CEOs. Jay W. Lorsch, an HBS professor, and Thomas J. Tierney, of The Bridgespan Group, explain why, in this excerpt from their new book Aligning the Stars: How to Succeed When Professionals Drive Results. Plus: Q&A with Jay Lorsch
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Firms in the $80 billion professional services industry all face the same fundamental challenge: aligning their most valuable assets—the talents of their employees—with the strategy and organization of the firm. In this interview, HBS Professor Jay Lorsch, chair of the Executive Education program Leading Professional Service Firms, discusses the role these firms play in the world's economy and the keys to their success.
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